Rumors were circulating recently in the Korean military and defense
industry that U.S. intelligence agencies are investigating Korea's
weapons production and exports.

"The rumors said that CIA and
FBI agents have arrived and are investigating the Defense Acquisition
Program Administration and defense firms to find out whether Korea has
developed and exported weapons based on stolen U.S. military
technologies," a government official said Thursday. "But our own probe
into these rumors found no investigation of DAPA or defense firms by any
U.S. agencies."

The rumors began circulating after an unusual
joint Korea-U.S. investigation in September of suspicions that Korea
illegally disassembled the Tiger Eye, a key component of the
cutting-edge U.S.-made F-15K fighter jet equipment for low-altitude
night penetration attacks.

In early June, U.S. officials raised
suspicions that the seal of one box which the Air Force had sent to the
U.S. for maintenance showed evidence of having been broken, disassembled
and put back together again.

But a weeklong joint investigation in September failed to find proof that Korea had disassembled the Tiger Eye.

Afterwards,
there was talk that the U.S. was probing whether Korea had stolen U.S.
technologies, because it was very sensitive to Korean exports of the
T-50 supersonic jet trainers and missiles.

A military source
said, "It's true that the U.S. is responding sensitively to the increase
in our arms exports and that it's holding our exports of weapons made
with U.S. technological assistance strongly in check. But it would make
no sense for the FBI, a U.S. agency tasked with investigating internal
U.S. issues, to conduct an investigation here." The source said the
rumors were probably spread to stoke anti-American sentiment.

Korea
has recently emerged as the world's third largest arms market. The
government plans to decide on weapons models worth more than W10
trillion (US$1=W1,131) in October next year alone. Major procurement
plans include the third phase of the Air Force's F-X fighter acquisition
program worth W8.3 trillion, the Army's AH-X attack helicopter project
worth W1.8 trillion, and the Navy's maritime operations helicopter
project worth W550 billion.

American and European firms are
competing for a share of these projects partly because their own
countries' arms markets have dwindled sharply in the wake of drastic
military spending cuts.

The U.S. decided to cut US$350 billion
in defense spending over the next decade, plus another likely $600
billion. Since the end of the Cold War in the 1990s, European nations
such as the U.K. and Germany have kept slashing their defense spending.
The U.K. is putting some light aircraft carriers and vertical take-off
and landing aircraft on the auction block.

"Some European firms
are in such dire straits that this is a good opportunity for us to seek
core technology transfers or mergers with them," a government source
said.